Goose Island landlords worry 'railroad trolls' will derail North Side development

Major zoning changes expected to spark a wave of residential, office and retail development near the Chicago River have bumped into an unexpected obstacle from the area's gritty past: rail cars.

Property owners in the North Side Industrial Corridor are unhappy about the arrival of rows of train tanker cars on more than century-old tracks that run though Goose Island and east into the Lincoln Park area.

Advertisement

The Chicago Department of Transportation and one of the city's biggest real estate developers, Sterling Bay, are trying to end rail car storage in the area.

The issue has come to the forefront on the eve of planned redevelopments of several industrial parcels, including Sterling Bay's project with the stated goal of luring Amazon's second headquarters to as much as 100 riverfront acres. Tracks on Kingsbury Street run near that land, which includes the former A. Finkl & Sons steel site.

On Goose Island, tankers are parked within a few feet of buildings and businesses, and even in the middle of streets where the tracks run, said Matt Garrison, managing principal of Chicago developer R2.

The rail cars' arrival, closely following the City Council's recent approval of zoning changes to the 760-acre former North Branch Industrial Corridor, appears more than coincidental, Garrison said. The rail cars beganaccumulating over the past month or so, as long-anticipated development plans have been unveiled, he said.

"In my opinion, these guys are railroad trolls," Garrison said. "They want to get paid to move out of the way."

Iowa Pacific General Counsel David Michaud called the timing "coincidental," saying the company recently signed new rail car storage contracts after repairing a swing bridge that crosses the river near North Avenue. The cars are stored for customers that use the Chicago Terminal Railroad in Elk Grove Village and Bensenville, Michaud said.

"We are in the process of negotiating with another customer to bring more storage-in-transit cars to Goose Island," Michaud said. "There's a likelihood we'll bring more cars to the area because we're at capacity in Elk Grove Village."

Michaud said the offer was a fair amount based on the value of long-term business Iowa Pacific would give up by moving stored cars away from R2's property.

R2 owns about 500,000 square feet of buildings in the area as well as 10 acres of development land. It plans to convert the Bliss Street building, a former brick warehouse, into loft offices. While obstructing area development, the rail cars also are creating a safety hazard, confusing drivers by blocking the roadway, Garrison said.

The city is also taking issue with the rail cars.

In a Sept. 12 letter to Iowa Pacific's president, Edwin Ellis Jr., CDOT Commissioner Rebekah Scheinfeld demanded that rail cars parked in the vicinity of Cherry Avenue and North Branch Street be moved and said "CDOT continues to investigate the situation and reserves the right to pursue all legal remedies available to it."

In the letter, provided by CDOT to the Tribune, Scheinfeld also said if the cars are not moved, the city may seek intervention by federal agencies.

Advertisement

More than a week later, the rail cars remain.

"We have federal operating rights, which we believe would be superior to any actions (CDOT) would be taking," Michaud said. "Respectfully, they don't have authority over our operations."

At least one federal agency also is involved.

On June 1, a company controlled by Sterling Bay filed preliminary documents with the federal Surface Transportation Board seeking to end Iowa Pacific's rights to use the Chicago Terminal Railroad, through a process called "adverse abandonment."

Through its lawyers, Sterling Bay argues the 2.6-mile stretch of train tracks is in disrepair and no longer needed, since businesses that previously used rails have shut down or relocated. The developer also said there are beneficial uses for the rail line, such as recreational trails and other infrastructure improvements.

"There's been no determination of abandonment, and it has not even been formally filed yet by Sterling Bay," Michaud said. "We don't agree that the abandonment filing will be successful."

Sterling Bay's redevelopment of the Finkl site, which it is calling Lincoln Yards, includes a plan to extend The 606 elevated trail east across the river and create other parks and recreational space.

"Freight rail activity, including rail car storage, is incompatible with the city of Chicago's recently adopted North Branch Industrial Corridor Framework Plan and with Sterling Bay's vision for Lincoln Yards," Sterling Bay said in an emailed statement."We have initiated the required steps for federal approval of the abandonment of freight service on rail lines operated by Chicago Terminal Railroad in the North Branch corridor area."

International Airport Centers, another big Goose Island landlord whose tenants include an Amazon distribution center on Cherry Avenue, also has complained to the city about the rail cars.

"We believe it's an inappropriate use," said Larry Krasner, president and chief investment officer of International Airport Centers. "We're following the guidance of CDOT and the courts."

Krasner declined to comment on the rail cars' impact on Amazon and other tenants.

Iowa Pacific owns freight and passenger rail lines in states including Oregon, New York and Mississippi, according to its website. Iowa Pacific provides services including rail car storage, logistics and locomotive and car leasing.